(Bloomberg) — Nokia Oyj’s mobile networks assets are drawing preliminary interest from suitors including Samsung Electronics Co. amid increasing pressure to search out latest growth within the troubled telecom equipment sector, individuals with knowledge of the matter said.
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The Finnish company has been having discussions with advisers about potential options for its mobile networks business, which has struggled for years to compete with larger rivals like Huawei Technologies Co., the people said. Nokia has considered plenty of different scenarios, from selling some or the entire division, to spinning it off or combining with a rival, the people said.
Deliberations are still at an early stage, and there’s no certainty Nokia will resolve to pursue any transaction. The complete unit might be valued at roughly $10 billion, the people said, asking to not be identified because the data is private.
Samsung has expressed initial interest in acquiring some Nokia assets because it seeks to achieve scale within the radio access networks that connect mobile phones to telecom infrastructure, the people said. Any potential divestments could also attract interest from other rivals, the people said.
Shares of Nokia jumped 7.1% to €4.06 at 4:17 p.m. in Helsinki trading after earlier increasing as much as 8.1%, the largest intraday gain since January. The shares have gained 33% this yr, giving the corporate a market value of about €22.8 billion ($25.3 billion).
Chief Executive Officer Pekka Lundmark has tried to show Nokia around since taking the reins 4 years ago. While 5G rollouts began strong, demand from telecom operators has began declining, and the corporate is searching for latest businesses that don’t rely as heavily on carriers’ network buildouts.
A representative for Samsung declined to comment. A spokesperson for Nokia said it’s committed to the success of the mobile networks business, which it said is “highly strategic” for the corporate.
“The business has made significant progress this yr each on right-sizing its cost-base while protecting our product roadmap and winning latest deals with latest customers and increasing share with existing customers,” the spokesperson said. “Nokia is targeted on ensuring that Mobile Networks is positioned to serve its customers constructing the very best performing networks, investing in its portfolio and creating value for Nokia’s shareholders.”
Nokia’s mobile networks division supplies base stations, radio technology and servers to wireless operators world wide. It contributed about 44% of Nokia’s total revenue last yr, making it the corporate’s largest segment, in line with data compiled by Bloomberg. However the business has been suffering as phone firms, especially in Europe, delay expensive network upgrades.
Nokia, once the world’s leading supplier of mobile phones, ultimately sold off that business after losing market share to Apple Inc. and Samsung. It has since focused on making the equipment for communications networks, including the gear that carries signals for mobile devices.
Western governments have grown increasingly concerned about Huawei’s dominance within the communications equipment sector and the shortage of strong rivals. Washington has warned that Beijing could use the Chinese company’s networks for intelligence gathering, as the corporate has successfully deployed its gear world wide.
Combining Nokia’s mobile networks business with a rival could create a stronger business in a position to higher compete in latest technologies. Telecom operators have been frustrated by their limited alternative amongst equipment providers. Best known for its smartphones and memory chips, South Korea-based Samsung can be a competitor in communications equipment, nevertheless it has lacked the dimensions to compete in that business with Huawei and Ericsson AB.
Nokia was hit particularly hard last yr when US operator AT&T Inc. announced that it might go along with Sweden’s Ericsson as the only real supplier of mobile Open RAN equipment in a deal value $14 billion. Nokia has been working to diversify its customer base and deal with latest areas of growth.
“We’re the one company on this planet outside of China that’s in a position to deliver all key parts of the network infrastructure that is required: the core network software, transport network, all of the optical connections, after which each fixed broadband and mobile access networks,” Lundmark said in a July interview with CNBC. “There isn’t anybody else.”
The corporate is seeing growth in its fixed networks division, which sells equipment to support fiber optic and cable technologies. Nokia agreed in June to amass US-based Infinera for $2.3 billion, taking a major bet on the synthetic intelligence boom.
–With assistance from Vinicy Chan and Michelle F. Davis.
(Updates with share move in fifth paragraph)
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